MacMillan, along with Hachette, HarperCollins, Simon & Schuster and the Penguin Group, were accused last April of cooking up a price-fixing scheme with Apple that would give the electronics company a foothold in the e-book market that had been dominated by Amazon.
Previous to the Apple agreement, publishers would sell e-books at a discounted rate to resellers, who could then choose to set their own retail prices. After Apple launched its iPad tablet and sought to make inroads in the e-book market, the major publishers all shifted to a model where the publisher set the final retail price, with the retailer receiving a percentage of that price.
This meant that Amazon, which can afford slim margins on some items because of its vast array of offerings, could no longer cut prices to compete with Apple and other e-book sellers. For the most part, an e-book from one online store would cost the same everywhere.
The folks at Justice allege that this pricing model effectively put a halt to any sort of competition in the market. As evidence, one need only look at all the titles available for less money in printed form than as an e-book, even though there are no printing, shipping or warehousing costs associated with e-books. Additionally, the average cost of an e-book had begun to rise during this time, while the format’s popularity grew.
Within hours of the DOJ announcing their lawsuit against the publishers and Apple, Hachette, HarperCollins, and Simon & Schuster announced a settlement. The court finally approved that settlement in September. That same month, those publishers announced a $69 settlement of a suit bought by attorneys general of dozens of 33 states.
Penguin reached a settlement with the DOJ in December, though that settlement is still pending court approval, which won’t come until after the end of the public comment period in March.
Under the proposed settlement agreement with the DOJ, Macmillan will be required to lift pricing restrictions on e-book sellers. It also won’t be able to enter into any new pricing agreements that include pricing restrictions until December 2014.
Additionally, PaidContent reports that MacMillan announced on Friday that it will pay out $20 million to settle the attorneys general lawsuits.
“As a result of today’s settlement, Macmillan has agreed to immediately allow retailers to lower the prices consumers pay for Macmillan’s e-books,” said Jamillia Ferris, Chief of Staff and Counsel at the Department of Justice’s Antitrust Division. “Just as consumers are already paying lower prices for the e-book versions of many of Hachette’s, HarperCollins’ and Simon & Schuster’s new releases and best sellers, we expect the prices of many of Macmillan’s e-books will also decline.”
In spite of the settlement, MacMillan CEO John Sargent remains confident that his company didn’t break the law.
“I had an old fashioned belief that you should not settle if you have done no wrong,” wrote Sargent in a statement. “As it turns out, that is indeed old fashioned.
“Our company is not large enough to risk a worst case judgment. In this action the government accused five publishers and Apple of conspiring to raise prices. As each publisher settled, the remaining defendants became responsible not only for their own treble damages, but also possibly for the treble damages of the settling publishers (minus what they settled for). A few weeks ago I got an estimate of the maximum possible damage figure. I cannot share the
breathtaking amount with you, but it was much more than the entire equity of our company.”
With MacMillan being the last of the publishers to agree to the settlement, Apple stands alone to face the DOJ at trial, which is scheduled to begin in June.